<PAGE>

                                   FORM 10-QSB



               Quarterly Report Under Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                 For the quarterly period ended January 31, 2001

                           Commission File No. 1-8125


                                  TOROTEL, INC.
        (Exact name of small business issuer as specified in its charter)


                MISSOURI                                 44-0610086
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


                13402 SOUTH 71 HIGHWAY, GRANDVIEW, MISSOURI 64030
                    (Address of principal executive offices)


                                 (816) 761-6314
                           (Issuer's telephone number)


                                      NONE
              (Former name, former address and former fiscal year,
                          if change since last report)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months and (2) has been
subject to such filing requirements for the past 90 days.

                                    Yes  X    No
                                        ---      ---

As of March 8, 2001, there were 2,811,590 shares of Common Stock, $.01 Par
Value, outstanding.


<PAGE>


                         TOROTEL, INC. AND SUBSIDIARIES



                                      INDEX


<TABLE>
<CAPTION>

PART I.  FINANCIAL INFORMATION
<S>                                                                             <C>
         Item 1.  Financial Statements

                  Consolidated Balance Sheet as of January 31, 2001               1

                  Consolidated Statements of Operations for the nine months
                           ended January 31, 2001 and 2000                        2

                  Consolidated Statements of Operations for the three months
                           ended January 31, 2001 and 2000                        3

                  Consolidated Statements of Cash Flows for the nine months
                           ended January 31, 2001 and 2000                        4

                  Notes to Consolidated Financial Statements                      5

         Item 2.  Management's Discussion and Analysis or Plan of Operation      10



PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings                                              13

         Item 4.  Submission of Matters to a Vote of Security Holders            13

         Item 6.     Exhibits and Reports on Form 8-K                            13



SIGNATURES                                                                       14
</TABLE>


<PAGE>


PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements

CONSOLIDATED BALANCE SHEET (Unaudited)
As of January 31, 2001

<TABLE>
<CAPTION>

ASSETS

Current assets:
<S>                                                                <C>
     Cash                                                          $    192,000
     Accounts receivable, net                                           366,000
     Current maturity of note receivable (Notes 10 and 11)              145,000
     Inventories (Note 3)                                               267,000
     Prepaid expenses and other current assets                           29,000
                                                                   ------------
                                                                        999,000

Property, plant and equipment, net                                      337,000

Note receivable (Notes 10 and 11)                                       199,000

Other assets                                                              2,000
                                                                   ------------

                                                                    $ 1,537,000
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Current maturities of long-term debt (Notes 5 and 10)         $    219,000
     Trade accounts payable (Note 10)                                   796,000
     Accrued liabilities (Note 10)                                      258,000
                                                                   ------------
                                                                      1,273,000

Long-term debt, less current maturities (Notes 5 and 10)                504,000

Note and interest payable to former officer (Note 9)                    551,000

Stockholders' deficit (Notes 6, 7, and 8):
     Common stock, at par value                                          29,000
     Capital in excess of par value                                  10,085,000
     Accumulated deficit                                            (10,700,000)
                                                                   ------------
                                                                       (586,000)
     Less treasury stock, at cost                                       205,000
                                                                   ------------
                                                                       (791,000)


                                                                    $ 1,537,000
                                                                   ============
</TABLE>


         The accompanying notes are an integral part of this statement.


                                        1
<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended January 31,

<TABLE>
<CAPTION>

                                                            2001                        2000
                                                        ---------------          ---------------
<S>                                                      <C>                        <C>
Net sales                                                $  2,537,000              $  2,485,000
Cost of goods sold                                          1,585,000                 1,767,000
                                                        ---------------          ---------------
     Gross profit                                             952,000                   718,000

Operating expenses:
     Engineering                                              127,000                   138,000
     Selling, general and administrative                      581,000                   580,000
                                                        ---------------          ---------------
                                                              708,000                   718,000
                                                         --------------           --------------

     Earnings from operations                                 244,000                        -

Other expense (income):
     Interest expense                                          80,000                    83,000
     Interest income                                          (30,000)                  (27,000)
     Other, net                                                (3,000)                        -
                                                        ---------------          ---------------
                                                               47,000                    56,000
                                                        ---------------          ---------------

     Earnings (loss) before provision for income taxes        197,000                   (56,000)

Provision for income taxes (Note 4)                                 -                         -
                                                        ---------------          ---------------

Net earnings (loss)                                     $     197,000              $    (56,000)
                                                        ===============          ===============


Basic earnings (loss) per share (Note 6)                 $        .07                   $  (.02)
                                                         =============           ===============


Diluted earnings (loss) per share (Note 6)               $        .07                   $  (.02)
                                                         =============           ===============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                        2


<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended January 31,

<TABLE>
<CAPTION>

                                                             2001                       2000
                                                        ---------------          ---------------
<S>                                                      <C>                        <C>
Net sales                                              $     842,000              $     822,000
Cost of goods sold                                           508,000                    562,000
                                                        --------------            --------------

     Gross profit                                            334,000                    260,000

Operating expenses:
     Engineering                                              43,000                     48,000
     Selling, general and administrative                     194,000                    194,000
                                                        --------------            --------------
                                                             237,000                    242,000
                                                        --------------            --------------

     Earnings from operations                                 97,000                     18,000

Other expense (income):
     Interest expense                                         26,000                     27,000
     Interest income                                         (12,000)                    (9,000)
     Other, net                                               (1,000)                         -
                                                        --------------            --------------
                                                              13,000                     18,000
                                                        --------------            --------------

     Earnings before provision for income taxes               84,000                          -

Provision for income taxes (Note 4)                                -                          -
                                                        --------------            --------------

Net earnings                                           $      84,000               $          -
                                                        ==============            ==============


Basic earnings per share (Note 6)                      $         .03               $          -
                                                        ==============            ==============

Diluted earnings per share (Note 6)                    $         .03               $          -
                                                        ==============            ==============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                        3


<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended January 31,

<TABLE>
<CAPTION>

                                                                 2001                       2000
                                                            ---------------            ---------------

Cash flows from operating activities:
<S>                                                         <C>                         <C>
     Net earnings (loss)                                    $    197,000                $     (56,000)
     Adjustments to reconcile net earnings (loss) to
         net cash provided by operations:
           Depreciation and amortization                          60,000                       84,000
           Increase (decrease) in cash flows from operations
           resulting from changes in:
                Accounts receivable                               48,000                      130,000
                Inventories                                      (67,000)                     206,000
                Prepaid expenses and other assets                (21,000)                     (17,000)
                Trade accounts payable                           (50,000)                     (40,000)
                Accrued liabilities                              (35,000)                     (46,000)
                                                            ---------------            ---------------
Net cash provided by operating activities                        132,000                      261,000
                                                            ---------------            ---------------
Cash flows from investing activities:
     Capital expenditures                                              -                       (2,000)
     Proceeds from note receivable                                97,000                           -
                                                            ---------------            ---------------

     Net cash provided by (used in) investing activities          97,000                       (2,000)
                                                            ---------------            ---------------

Cash flows from financing activities:
     Principal payments on long-term debt                       (154,000)                    (207,000)
     Payments on capital lease obligations                        (9,000)                     (13,000)
     Note and interest payable to former officer                  31,000                       31,000

Net cash provided by (used in) financing activities             (132,000)                    (189,000)
                                                            ---------------            ---------------
Net increase in cash                                              97,000                       70,000
Cash at beginning of period                                       95,000                       51,000
                                                            ---------------            ---------------

Cash at end of period                                       $    192,000                 $    121,000
                                                            ==============              ==============


Supplemental Disclosures of Cash Flow Information
  Cash paid during the period for:
         Interest                                           $    46,000                 $     52,000
</TABLE>


        The accompanying notes are an integral part of these statements.


                                        4
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Note 1 - Basis of Presentation

         Torotel specializes in the custom design and manufacture of a wide
variety of precision magnetic components, consisting of transformers, inductors,
reactors, chokes and toroidal coils. Approximately 90% of Torotel's sales are
derived from domestic customers. The accompanying unaudited consolidated
financial statements reflect the normal recurring adjustments which are, in the
opinion of management, necessary to present fairly Torotel's financial position
at January 31, 2001, and the results of operations for the three and nine months
ended January 31, 2001.
         The financial statements contained herein should be read in conjunction
with Torotel's financial statements and related notes filed on Form 10-KSB for
the year ended April 30, 2000.


Note 2 - Realization of Assets

         The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of Torotel as a going concern. While Torotel's profitability has
improved during the past few quarters, the effect of the substantial operating
losses incurred in the fiscal years ended April 30, 1999, 1998 and 1997,
continues to cloud Torotel's outlook. While continuing operations have provided
cash in the last three years, the uncertainty surrounding the outstanding
liabilities associated with (i) a terminated merger in fiscal 1999; (ii) the
trade debt of a discontinued subsidiary (see Note 10 of Notes to Consolidated
Financial Statements); and (iii) the note and interest payable to a former
officer (see Note 9 of Notes to Consolidated Financial Statements), raises doubt
about Torotel's ability to continue as a going concern. While there is no
immediate plan to secure any new financing or capital, management continues to
evaluate ways of improving Torotel's liquidity.
         In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying consolidated balance sheet is dependent upon continued operations
of Torotel, which in turn is dependent upon Torotel's ability to meet its
financing requirements on a continuing basis, to maintain present financing, and
to succeed in its future operations. The consolidated financial statements do
not include any adjustment relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should Torotel be unable to continue in existence.


Note 3 - Inventories

         The components of inventories are summarized as follows:

<TABLE>
<CAPTION>
<S>                                                     <C>
                  Raw materials                         $    46,000
                  Work in process                           169,000
                  Finished goods                             52,000
                                                        -----------
                                                        $   267,000
                                                        ===========
</TABLE>


                                        5
<PAGE>


Note 4 - Income Taxes

         Torotel has net operating loss carryforwards available as benefits to
reduce future income taxes, subject to applicable limitations. These operating
loss carryforwards expire in various amounts in the years 2001 through 2014.
      The difference between the financial and tax bases of assets and
liabilities is determined annually. Deferred income taxes and liabilities are
computed for those differences that have future tax consequences using the
currently enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. Valuation allowances are established, if
necessary, to reduce the deferred tax asset to the amount that will, more likely
than not, be realized. Income tax expense is the current tax payable or
refundable for the period plus or minus the net change in the deferred tax
assets or liabilities.
      The following table summarizes the components of the net deferred tax
asset:

<TABLE>
<CAPTION>

<S>                                                         <C>
           Net operating loss carryforwards                 $         2,834,000
           Inventory valuation reserve                                  201,000
           Tax credit carryforwards                                      58,000
           Other                                                         42,000
                                                            --------------------
                                                                      3,135,000
           Less valuation allowance                                   3,135,000
                                                            --------------------
                                                            $                 -
                                                            ====================
</TABLE>


Note 5 - Financing Agreements

         Under the terms of a loan agreement with Vista Bank, N.A. (formerly
named Phillipsburg National Bank & Trust Company), Torotel is required to comply
with certain covenants. The bank has modified these covenants based on the
revised corporate structure subsequent to the sale of ECH assets and the
settlement with the U.S. government (see Notes 9 and 10 of Notes to Consolidated
Financial Statements). As of January 31, 2001, Torotel was in compliance with
these covenants.


Note 6 - Earnings Per Share

         Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS
PER SHARE, requires dual presentation of basic and diluted EPS on the face of
the statement of earnings regardless of whether basic and diluted EPS are the
same; and requires a reconciliation of the numerator and denominator used in
computing basic and diluted EPS. Basic EPS excludes dilution and is computed by
dividing earnings available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion 15. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Pursuant to SFAS No. 128, the basic and diluted loss per common share were
computed as follows:


                                        6
<PAGE>

<TABLE>
<CAPTION>

         YEAR-TO-DATE EPS CALCULATIONS                                     2001                              2000
                                                                     ----------------                ------------------

<S>                                                                   <C>                              <C>
         Net earnings (loss)                                          $      197,000                   $      (56,000)
         Weighted average common shares outstanding                        2,811,590                        2,811,590
         Incremental shares                                                        -                                -

         Basic earnings (loss) per share                              $          .07                   $         (.02)
         Diluted earnings (loss) per share                            $          .07                   $         (.02)
</TABLE>

         No incremental shares are included in the EPS calculations for 2001
         because the market price of Torotel's common stock is lower than the
         exercise price of the stock options under contract. No incremental
         shares are included in the EPS calculations for 2000 due to the net
         loss.

      QUARTERLY EPS CALCULATIONS

<TABLE>
<CAPTION>
                                                                           2001                              2000
                                                                     ----------------                ------------------
<S>                                                                  <C>                              <C>
         Net earnings                                                $        84,000                  $            -
         Weighted average common shares outstanding                        2,811,590                       2,811,590
         Incremental shares                                                        -                               -

         Basic earnings per share                                    $           .03                  $            -
         Diluted earnings per share                                  $           .03                  $            -
</TABLE>

         No incremental shares are included in the EPS calculations for either
         period because the market price of Torotel's common stock is lower than
         the exercise price of the stock options under contract.


Note 7 - Employee Stock Options

         In accordance with the Incentive Compensation Plan approved by
stockholders on September 19, 1994, Torotel reserved 400,000 common shares for
issuance to key employees pursuant to the exercise of incentive and
non-qualified stock options granted prior to June 20, 2004. The options are
accounted for under APB Opinion 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and related Interpretations. The incentive stock options have a term of five
years when issued and vest 50% per year at the end of each of the first two
years. The non-qualified stock options have a term of ten years when issued and
vest 25% per year at the end of each of the first four years. The exercise price
of each option equals the market price of Torotel's common stock on the date of
grant. Accordingly, no compensation cost will be recognized upon the grant of
any options.
      As of January 31, 2001, there were no options outstanding under this Plan.
The fair values of the options granted previously were estimated on the date of
grant using the Black-Scholes options-pricing model. The fair value of the
incentive stock options was determined using the following weighted average
assumptions: no dividend payments over the life of the options; expected
volatility of 106.1%; risk-free interest rate of 6.94%; and expected life of
five years. The fair value of the non-qualified stock options was determined
using the following weighted average assumptions: no dividend payments over the
life of the options; expected volatility of 106.1%; risk-free interest rate of
6.6%; and expected life of ten years.
         Stock option transactions under the 1994 Incentive Compensation Plan
for each period are summarized as follows:


                                        7


<PAGE>

<TABLE>
<CAPTION>
                                                                        2001                           2000
                                                             -----------------------------    ------------------------
                                                                 Weighted                      Weighted
                                                                  Shares         Average         Shares      Average
                                                                  Under         Exercise          Under      Exercise
                                                                  Option          Price          Option        Price
                                                             --------------   ------------    ------------   ----------

<S>                                                           <C>              <C>            <C>            <C>
      Outstanding at beginning of period                              -               -             7,500       $1.00
      Granted                                                         -               -                 -           -
      Exercised                                                       -               -                 -           -
      Forfeited                                                       -               -                 -           -
                                                              -------------                   ------------
      Outstanding at end of period                                    -               -             7,500       $1.00
                                                              =============                   ============
</TABLE>

Note 8 - Stock Warrants

         Pursuant to a settlement that ended a class action alleging racial
discrimination in hiring by Torotel Products, Inc., Torotel agreed to issue a
warrant certificate to the Torotel Settlement Fund to purchase 100,000 shares of
Torotel, Inc. common stock at $.75 per share. The warrant is 100% vested upon
issuance and cannot be exercised until the market price of Torotel's common
stock reaches $2.00 per share. The warrant expires on May 4, 2003.
         The $33,000 fair value of the warrant was estimated on the date of
grant using the Black-Scholes options-pricing model using the following weighted
average assumptions: no dividend payments over the life of the warrant; expected
volatility of 75.9%; risk-free interest rate of 5.8%; and expected life of two
years.
         Stock warrant transactions for each period are summarized as follows:

<TABLE>
<CAPTION>
                                                                        2001                           2000
                                                             -----------------------------    ------------------------
                                                                 Weighted                      Weighted
                                                                  Shares         Average         Shares      Average
                                                                  Under         Exercise          Under      Exercise
                                                                  Option          Price          Option        Price
                                                             --------------   ------------    ------------   ----------

<S>                                                           <C>              <C>            <C>            <C>
      Outstanding at beginning of period                            100,000       $  .75         100,000        $  .75
      Granted                                                            -             -               -             -
      Exercised                                                          -             -               -             -
      Forfeited                                                          -             -               -             -
                                                             --------------                   ------------
      Outstanding at end of period                                 100,000        $  .75         100,000        $  .75
                                                             ==============                   ============
      Warrants exercisable at end of period                              -             -               -             -
      Weighted average fair value of
           warrants granted during the year                                            -                             -
</TABLE>

The following information applies to warrants outstanding at January 31, 2001:

<TABLE>
<CAPTION>

<S>                                                                                 <C>
           Number outstanding                                                           100,000
           Range of exercise prices                                                  $      .75
           Weighted average exercise price                                           $      .75
           Weighted average remaining contractual life                                     2.25 yrs.
</TABLE>


                                        8
<PAGE>


Note 9 - Note Payable to Former Officer

         On May 6, 1997, Torotel Products, Inc. was accepted into the Voluntary
Disclosure Program of the United States Department of Defense, resulting from
its failure to perform some required "thermal shock" testing as frequently as
required, and inaccurately certifying that all required testing had been
performed. On June 27, 2000, Torotel Products entered into a Release and
Settlement Agreement with the United States of America. Pursuant to the
agreement, Torotel Products agreed to pay an aggregate total of $100,000 over a
nineteen-month period. The legal fees associated with the testing deficiencies
have amounted to $2,000 during the current fiscal year, $8,000 in fiscal 2000,
and $282,000 in aggregate since the investigation began in the third quarter of
the fiscal year ended April 30, 1997.
      Torotel believes that certain of its former officers may have been
responsible for the misconduct related to the test failures. While no formal
action has been undertaken, Torotel still intends to recover the costs and
damages. Torotel has suspended all principal and interest payments due under a
note payable to a former officer since February 1997. As a result, as of January
31, 2001, the aggregate amount due of $551,000, which consists of the
outstanding principal of $384,000 plus the accrued interest of $167,000, has
been classified as a long-term liability in the accompanying consolidated
balance sheet.


Note 10 - Discontinued Subsidiary

      The operations of East Coast Holdings, Inc. (formerly named OPT
Industries, Inc.), a wholly owned subsidiary of Torotel, were discontinued in
April 1999, and the assets sold to SIGMA Associates, L.L.C. The remaining assets
and liabilities related to this subsidiary as of January 31, 2001, are included
in the accompanying consolidated balance sheet under the following captions and
in the amounts shown:

<TABLE>
<CAPTION>
<S>                                                                 <C>
                Current maturity of note receivable                 $    140,000
                Note receivable, less current maturity              $    204,000
                Current maturities of long-term debt                $     83,000
                Trade accounts payable                              $    442,000
                Accrued liabilities                                 $    132,000
                Long-term debt, less current maturities             $    123,000
</TABLE>

Note 11 - Note Receivable

         Under the original terms, the note receivable from SIGMA Associates,
L.L.C. accrued interest at a fixed rate of 8% per annum. In September 2000,
Torotel exercised its right under the terms of the note to invoke the default
rate of interest, which is 5% per annum above the prevailing rate, because some
payments were received beyond the normal 15-day grace period. As a result, the
effective rate of interest on the note is presently 13% per annum. However,
because recent payments have been received on a timely basis, Torotel has agreed
to revert back to the original interest rate of 8% per annum beginning with the
payment due on March 19, 2001.


                                        9
<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


         The following management comments regarding Torotel's results of
operations and outlook should be read in conjunction with the Consolidated
Financial Statements included pursuant to Item 1 of this Quarterly Report. The
discussion and analysis of the results of operations include the operations of
Torotel, Inc. and its subsidiary, Torotel Products, Inc.

NINE MONTHS ENDED JANUARY 31, 2001 VERSUS NINE MONTHS ENDED JANUARY 31, 2000

      Net sales increased 2% from $2,485,000 to $2,537,000 because of higher
sales of the potted coil assembly for the Hellfire II missile system. There were
no shipments of these assemblies during the first and third quarters last year,
since sales are limited to the number of Hellfire II missiles sold to foreign
countries by the prime contractor. Torotel presently has a $111,000 backlog for
this product, which is scheduled to ship over the next three quarters. Torotel
has experienced a 43% increase in order bookings for its magnetics products
during the first nine months of fiscal 2001, which has Torotel's magnetics
backlog at its highest level in nearly three years.
         Gross profit as a percentage of net sales increased nearly 9% primarily
because of lower material and labor costs associated with the product mix and
improved labor productivity resulting from ongoing efforts to increase
throughput and reduce cycle times.
         Engineering expenses decreased 8% from $138,000 to $127,000 because of
a decrease in payroll costs due to a reduction in full-time personnel.
Management does not anticipate any significant change in the present level of
engineering expenses.
         Selling, general and administrative (SG&A) expenses increased slightly.
The SG&A expenses of Torotel, Inc. increased 20% from $89,000 to $107,000
primarily because of a $13,000 increase in professional fees and a $5,000
increase in investor relations costs associated with printing and mailing
requirements for the annual shareholders meeting. The SG&A expenses of Torotel
Products decreased 3% from $491,000 to $474,000 primarily because of a $54,000
decrease in payroll costs from both a reduction in full-time personnel and the
outsourcing of certain functions, an $8,000 decrease in utilities costs, and a
$4,000 decrease in depreciation expense. These decreases were offset by an
$18,000 accrual for incentive compensation awards, an $8,000 increase in
customer fast-pay discounts, an $8,000 increase in insurance costs resulting
from a return premium in the prior year, a $7,000 increase in building
maintenance and repair costs, a $5,000 increase in sales commissions, and a
$3,000 increase in rental costs. Management does not anticipate any significant
change in the present level of SG&A expenses.
         Interest expense decreased nearly 4%. The interest expense of Torotel,
Inc. decreased 8% from $50,000 to $46,000 because of a lower principal balance
on the guaranteed note with Vista Bank. The interest expense of Torotel Products
increased 3% from $33,000 to $34,000 because of the accrual of interest on the
note payable to the Torotel Settlement Fund.
         Interest income increased 11% because of a rate increase on the note
receivable from SIGMA Associates, L.L.C., which was part of the consideration
received from the sale of substantially all the assets of East Coast Holdings,
Inc. (formerly named OPT Industries, Inc.). The rate increase was triggered by
late payments on the note.


                                       10
<PAGE>


         Sundry non-operating income increased because of late fees collected
pursuant to the terms of the note receivable from SIGMA Associates, L.L.C.
      For the reasons discussed above, the consolidated pretax earnings
increased from a loss of $56,000 to a profit of $197,000. The pretax loss of
Torotel, Inc. increased from $112,000 to $120,000. The pretax earnings of
Torotel Products increased from $56,000 to $317,000.


THREE MONTHS ENDED JANUARY 31, 2001 VERSUS THREE MONTHS ENDED JANUARY 31, 2000

      Net sales increased 2% from $822,000 to $842,000 because of higher sales
of the potted coil assembly for the Hellfire II missile system. There were no
shipments of these assemblies during the third quarter last year, since sales
are limited to the number of Hellfire II missiles sold to foreign countries by
the prime contractor.
         Gross profit as a percentage of net sales increased 8% primarily
because of lower material costs associated with the product mix.
         Engineering expenses decreased 10% from $48,000 to $43,000 because of a
decrease in payroll costs due to a reduction in full-time personnel. Management
does not anticipate any significant change in the present level of engineering
expenses.
      Selling, general and administrative (SG&A) expenses remained unchanged at
$194,000. The SG&A expenses of Torotel, Inc. decreased 22% from $36,000 to
$28,000 primarily because of a decrease in professional fees. The SG&A expenses
of Torotel Products increased 5% from $158,000 to $166,000 primarily because of
an $18,000 accrual for incentive compensation awards and an $8,000 increase in
insurance costs resulting from a return premium in the prior year. These
increases were offset partially by a $16,000 decrease in payroll costs from both
a reduction in full-time personnel and the outsourcing of certain functions and
a $2,000 decrease in depreciation expense. Management does not anticipate any
significant change in the present level of SG&A expenses.
         Interest expense decreased nearly 4%. The interest expense of Torotel,
Inc. decreased 6% from $16,000 to $15,000 because of a lower principal balance
on the guaranteed note with Vista Bank. The interest expense of Torotel Products
remained unchanged at $11,000.
         Interest income increased 33% because of a rate increase on the note
receivable from SIGMA Associates, L.L.C., which was part of the consideration
received from the sale of substantially all the assets of East Coast Holdings,
Inc. (formerly named OPT Industries, Inc.). The rate increase was triggered by
late payments on the note.
         Sundry non-operating income increased because of late fees collected
pursuant to the terms of the note receivable from SIGMA Associates, L.L.C.
         For the reasons discussed above, the consolidated pretax earnings
increased from breakeven to $84,000. The pretax loss of Torotel, Inc. decreased
from $43,000 to $30,000. The pretax earnings of Torotel Products increased from
$43,000 to $114,000.


LIQUIDITY AND CAPITAL RESOURCES

         Torotel has operated without a revolving credit line since December
1998. Since that time, Torotel has

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<PAGE>


relied on funds generated internally to meet its normal operating requirements
and to service bank indebtedness. While continuing operations have provided cash
in the last three years, the uncertainty surrounding the outstanding liabilities
associated with (i) a terminated merger in fiscal 1999; (ii) the trade debt of a
discontinued subsidiary (see Note 10 of Notes to Consolidated Financial
Statements); and (iii) the note and interest payable to a former officer (see
Note 9 of Notes to Consolidated Financial Statements), raises doubt about
Torotel's ability to continue as a going concern. While there is no immediate
plan to secure any new financing or capital, management continues to evaluate
ways of improving Torotel's liquidity.
      During the nine months ended January 31, 2001, Torotel's operations
provided $132,000 in cash flow because of pretax earnings.
         Investing activities provided $97,000 in cash flow because of proceeds
from the note receivable from SIGMA Associates, L.L.C. While Torotel did not
have any capital expenditures during the nine months ended January 31, 2001, it
does anticipate approximately $5,000 in capital expenditures during the balance
of fiscal 2001.
         Financing activities used $132,000 in cash flow because of decreases in
long-term debt.
         Management believes that inflation will have only a minimal effect on
future operations since such effects will be offset by sales price increases,
which are not expected to have a significant effect upon demand.


Year 2000 Issues

         Torotel has not experienced any Year 2000 problems with its information
technology systems. Management had determined that Torotel's hardware and
software applications were Year 2000 compliant based on extensive testing and
vendor certifications. In addition, management had polled its significant
suppliers and customers and, based on these responses, had determined that its
operation did not appear to be vulnerable to a third parties' failure to
remediate their own Year 2000 issues. Management also tested various equipment
items to verify their Year 2000 functionality.
         Torotel did not incur any external costs for its Year 2000 readiness
reviews and assessments. Internal costs were not tracked separately; however,
these costs were minimal and limited to related payroll costs for certain
internal employees and postage for the mailing of questionnaires to suppliers
and customers.


Other

         Except for historical information contained herein, certain of the
matters discussed above are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and are subject to the safe
harbor created by that Act. These statements are based on assumptions about a
number of important factors and involve risks and uncertainties that could cause
actual results to be different from what is stated here. These risk factors are:
decreased demand for products, delays in developing new products, expected
orders that do not materialize, loss of key customers, the impact of competition
and price erosion as well as supply and manufacturing constraints, and other
risks and uncertainties.


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<PAGE>

                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

         On May 6, 1997, Torotel Products, Inc. was accepted into the Voluntary
Disclosure Program of the United States Department of Defense, resulting from
its failure to perform some required "thermal shock" testing as frequently as
required, and inaccurately certifying that all required testing had been
performed. On June 27, 2000, Torotel Products entered into a Release and
Settlement Agreement with the United States of America. Pursuant to the
agreement, Torotel Products agreed to pay an aggregate total of $100,000 over a
nineteen-month period. The legal fees associated with the testing deficiencies
have amounted to $2,000 during the current fiscal year, $8,000 in fiscal 2000,
and $282,000 in aggregate since the investigation started in the third quarter
of the fiscal year ended April 30, 1997.
         Torotel believes that certain of its former officers may have been
responsible for the misconduct related to the test failures. While no formal
action has been undertaken, Torotel still intends to recover the costs and
damages. Torotel has suspended all principal and interest payments due under a
note payable to a former officer since February 1997. As a result, as of January
31, 2001, the aggregate amount due of $551,000, which consists of the
outstanding principal of $384,000 plus the accrued interest of $167,000, has
been classified as a long-term liability in the accompanying consolidated
balance sheet.
         The remaining liabilities related to a discontinued subsidiary include
trade accounts payable of $442,000 (see Note 10 of Notes to Consolidated
Financial Statements). Several claims have been filed by vendors for collection
of amounts due, and more are expected to be filed. Since the discontinued
subsidiary's remaining assets have been assigned as collateral for the remaining
bank debt and the debt owed to the United States, and remaining proceeds are
targeted for unpaid payroll taxes, this subsidiary has no other source of income
to satisfy its trade debt obligations. This trade debt remains the sole
responsibility of this subsidiary. Neither Torotel, Inc. or Torotel Products,
Inc. has assumed these obligations. While the claims by vendors may result in
judgments against the discontinued subsidiary, neither Torotel, Inc. or Torotel
Products, Inc. intends to provide any funds to satisfy the judgments.

Item 4.  Submission of Matters to a Vote of Security Holders

         The annual meeting of stockholders was held in Grandview, Missouri, on
Monday, September 18, 2000, to elect a Board of Directors. At the meeting, there
were 2,416,351 shares voting, with nominees needing 1,208,176 shares to be
elected. Stockholders elected the following individuals to a one-year term on
the Board of Directors, with the number of shares voting "FOR" each nominee
indicated.

                       Dale H. Sizemore, Jr.   2,385,149
                       Richard A. Sizemore     2,385,149
                       H. James Serrone        2,395,883

Item 6.   Exhibits and Reports on Form 8-K

a)  None.

b)  Reports on Form 8-K -- There were no reports filed on Form 8-K during
    the three months ended January 31, 2001.


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<PAGE>


                                   SIGNATURES


         In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


Torotel, Inc.
(Registrant)




Date:   March 8, 2001                      /s/   H. James Serrone
        -------------                      -----------------------------------
                                           H. James Serrone
                                           Vice President of Finance and
                                           Chief Financial Officer


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